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Practice Plan/Wesleyan issues response to The Budget

News

  Posted by: Dental Design      30th October 2024

Following the delivery of Rachel Reeves’s first Budget of the new Labour Party government, Practice Plan and Wesleyan Financial Services – have issued a response of the key points for dental professionals.

Iain Stevenson, Head of Dental, at Wesleyan Financial Services (of which Practice Plan is a part) says:

On the tax-free lump sum

“It was good to see the tax-free lump sum left untouched today. In our view, reducing or removing it would have had serious knock-on effects for dentists’ financial plans, causing some to re-think their retirement strategies and undermining confidence in pension saving overall.

“We hope that this isn’t brought up again as a potential source of tax-revenue and would welcome any commitment from the government around its future. After all, good planning is underpinned by certainty.”

On Employer National Insurance Contributions

“This is unwelcome news for dentists and for our dental services. This will cut into practice profits – making it even harder for dentists to invest in their facilities and teams.”

Capital Gains Tax

“The Chancellor also announced that Capital Gains Tax, paid on profits on the sale of business assets, would increase from 10% to 18% for basic rate taxpayers and from 20% to 24% for higher rate taxpayers.”

Business Asset Disposal Relief, which allows gains of up to £1 million to be taxed at a reduced rate of 10%, will rise to 14% in April 2025 and 18% from 2026-27.

That could be a serious blow to any practice owner who had planned to sell up to fund their retirement and who will now have to revisit their plans and recalculate whether a sale will now achieve the outcome they had anticipated.

Nigel Jones, Sales Director of Practice Plan adds:

On Business Asset Disposal Relief (BADR)

“The Business Asset Disposal Relief (BADR) provided an incentive for dentists to take the risk of starting and growing their own business. Today’s news weakens the incentive for them to do so, which will likely result in fewer dental options available for patients, and put more pressure on existing services.

“It will also impact those who were planning a sale soon, or those in the middle of a process. They may need to go back to the drawing board.”

Madeleine Dowling, technical team lead at Wesleyan Financial Services, comments:

On pensions being brought into IHT

The government wants a fairer tax system and for inheritance to be applied consistently across similar products such as pensions and savings. They also want to encourage people to use their pension tax relief for retirement as it was initially intended for and not as capital to be passed on. NHS death benefits are currently included in the estate in the event of death and the Personal Pensions will be treated in the same way from April 2027.

This doesn’t mean pensions are no longer tax efficient investments, but clients may look differently at how they take them at retirement. Rather than moving funds into income drawdown so they can be inherited by their dependants for example, they now may choose to take them and place them in a more IHT friendly investment such as an investment held in trust.

It has made IHT and retirement planning more complicated as there will need to be a comparison between the IHT liability of leaving the funds in a pension compared to the tax incurred for withdrawing the funds.

This will have upended some dentists’ plans. If you have been affected, it’s highly recommended to seek professional financial advice – IHT rules can be incredibly complex, and an adviser can help you consider any necessary changes to make sure your money is passed on to your loved ones in the most tax-efficient way and in line with your plans.”

 

Please bear in mind that advice in relation to inheritance tax planning is not regulated by the Financial Conduct Authority. Tax treatment depends on individual circumstances and may be subject to change in future.

Wesleyan Financial Services Ltd (Registered in England and Wales No. 1651212) is authorised and regulated by the Financial Conduct Authority. Registered Office: Colmore Circus, Birmingham B4 6AR. Telephone: 0345 351 2352. Calls may be recorded to help us provide, monitor and improve our services to you.


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